Housing: Median rent for a one bedroom hits $1,450

Yahoo Finance's Dani Romero explains the rise in rent prices as the national rent index hits another all-time high.

Video Transcript

BRIAN CHEUNG: Let's talk about another side of the price argument that's happening in the economy. Rent prices astronomical nationwide. That's thanks to high demand and also low inventory prices, expected only to go higher. Yahoo Finance's Dani Romero is here with the data. Dani, what's the breakdown?

DANI ROMERO: So it's not going to get any easier for renters. So don't expect any quick relief when it comes to rent increases. But it's also not going to get much worse after early next year. That's according to a UBS economist, but it is going to slow down. But it's also going to stay elevated through 2024.

Now we saw in Consumer Price Index, CPI, that rent climbed 5.8% over the year and-- excuse me-- and which sparked another economist at JPMorgan to make the call that rental inflation has been strong and is important to monitor, given its tendency for persistence and its large weight in CPI.

Now, remember, shelter is 32% of overall CPI. That being said, that shelter component of the CPI inflation is derived from housing costs on rents, not the prices on homes. So as the Fed hikes up interest rates to really dampen inflation, that has caused mortgage rates to jump, which has made homes less affordable for people.

So with the cost of goods being so high, many are really saying, you know, I'm no longer going to be buying a home right now. I'm going to jump into the rental market. And data from Redfin actually showed that about 60,000 home purchase agreements were cancelled. That is the biggest contract dump since the pandemic.

So there's going to be a lot of competition in the rental market. But, again, New York City topped the list as the most expensive market. That is, they're up 41% over the past year. But there's also really high demand in cities like Tennessee and North Carolina.

AKIKO FUJITA: Well, in some of these markets, that tradeoff doesn't exactly exist, right? Because rent's so high, even if you give up on your home if you don't have a down payment--

BRIAN CHEUNG: It's still--

AKIKO FUJITA: --it's still, we're looking at both being inflated.

DANI ROMERO: Exactly.

BRIAN CHEUNG: Yeah, well, we'll have to see, although you're seeing some depressurizing in some areas like Boise, for example. So every market is going to be a little bit different. Yahoo Finance's Dani Romero, thanks so much. Appreciate it.